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Satyam to focus on embedded software - Views on News from Equitymaster

Satyam to focus on embedded software

Satyam Computer has decided to focus on software for embedded systems, telecom and telephony applications.

The company has been successful in making a smooth transition from being a major Y2K service provider (which contributed 30% of their revenues in FY99) to focus on e–commerce (which now contributes 11% of its revenues), software applications (54%) and solutions (35%).

This segment is the fastest growing segment since the embedded systems are used in a wide variety of industries including power utilities, power equipment, banking, telecom and airlines. However, the company could possibly have to choose its areas of specialisation/vertical domain where it will operate. With physical infrastructure especially telecom and power set to get a big boost if Satyam can make a breakthrough, it could change the trajectory of the company’s operations.

As it is the company has already bagged orders worth $ 120 million which have to be implemented within a year. Thus it does have a cushion of the existing business doing well and its attempts in focusing on a new line of business seem sincere and not merely a ploy to transfer existing employees to a new task.

Market view:

Analysts have rated Satyam as a ‘buy’ primarily for two reasons. One, because of the company’s depth in the vertical business domains of banking and insurance services as well as telecom and engineering services. Secondly, the subsidiary/JV model of Satyam has paid off (for instance Satyam holds 60% of Satyam Infoway) and there are other subsidiary/JV companies, which can be listed/sold.

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